11 Large-Caps With Upside: Analysts

NEW YORK (TheStreet) -- Panasonic (PC), Sumitomo Mitsui Financial (SMFG), Mizuho Financial Group (MFG), Canon (CAJ), Nomura Holdings (NMR), Hitachi (HIT), Syngenta (SYT), Lloyds Banking Group (LYG), Barclays Plc (BCS), Rio Tinto (RIO) and VALE (VALE) have upside potential of 27% to 128%, based on analysts' consensus estimates of 12-month price targets.

We have identified stocks from Brazil, Switzerland, U.K. and Japan panning diverse sectors such as electronics, metals and mining, banking and financials and agri-business with a minimum market capitalization of $18 billion

These stocks are expected to gain up to 128% over the next 12 months with a mean upside value of around 53%, according to analysts polled by Bloomberg.

In comparison, other stocks such as BP ( BP), Vodafone ( VOD), Sterlite Industries ( SLT), HDFC Bank ( HDB), Credit Suisse Group ( CS), British Billiton ( BBL), HSBC ( HBC) and Coco Cola ( PKX) are expected to give a return 10% to 20%.

11. VALE ( VALE) is a metals and mining giant producing iron ore and iron ore pellets.

The company reported record operating income, margins and earnings for 2010. Operating revenue reached a new high of $21.7 billion, 40% higher than the previous all-time high in 2008. Net income reached an all-time high of $17.3 billion during 2010, up 31% from the earlier high of $13.2 billion in 2008. Operating margin for 2010 was 48%, best amongst peers.

Sales of bulk materials such as iron ore, pellets accounted for 74% of operating revenue in 2010, up from 64% in 2009. Asia's contribution to overall revenue dipped, while Europe's share increased during this period.

Vale invested $12.7 billion for maintaining existing assets and exploiting multiple organic growth opportunities, and an additional $ 6.7 billion for financing acquisitions. Analysts expect the stock to deliver gains of 27% in the next one year. The stock is trading at 6.7 times its estimated 2011 earnings.

10. Hitachi ( HIT) manufactures and sells electronic and electrical products in North America, Europe and Asia.

For the third quarter of fiscal 2010, operating income surged 53% year-over-year to $1.5 billion on improved revenue from operating segments such as construction and machinery, electronic systems and equipment and digital media and consumer products (DMCP).

Consolidated revenue increased 5% year-over-year to $27.9 billion. Overseas returns that account for around 44% of the company's revenue grew 8% during the December quarter on higher global demand. Net income for the quarter rose 49% to $993 million.

Backed by economic stimulus measures, the company expects segments like automotive systems, DMCP, social infrastructure and industrial systems to return profit. The stock is trading at 7.4 times its estimated fiscal 2010 earnings and analysts expect an upside of 31% in the next one year.

9. Rio Tinto ( RIO) is a global metal and mining giant, specializing in aluminum, copper, coal and iron ore. The company operates in more than 50 countries with bulk production coming from Australia and North America.

For the fourth quarter, global iron ore operations set a new a new annual record at 239 million tonnes and a quarterly production record of 65 million tonnes. However, mined and refined copper production slumped during the quarter. The company delivered earnings of $14 billion during 2010, 122% above 2009.

Rio Tinto recently announced that it has acquired a majority interest in Riversdale Mining, securing more 50% shares. The company approved capital projects worth $5.5 billion during the fourth quarter, bringing full year project approvals to $10.8 billion. The stock is trading at 7.7 times its 2011 earnings and has gained 22% during the last one year.

8. Nomura Holdings ( NMR) is a financial services company operating in Japan and the global markets. The company operates in three divisions: retail, wholesale and asset management.

Net income increased 13 times sequentially and 31% year-over-year to $165 million from the previous quarter. Income before tax was $340 million, up 30% from the prior quarter and 55% year-over-year. Net revenue for the third quarter was $3.6 billion, increasing 7% from the second quarter and 8% in the comparable quarter last year.

On the business performance, Kenichi Watanabe, Nomura's President and CEO, said, "Our retail division increased client assets, while asset management generated higher revenues on a rise in assets under management. Wholesale gained further momentum with robust client activities in Global Markets and an increasingly diverse revenue mix as our US franchise gained traction. Cross-divisional partnership between Investment Banking and Global Markets led to a number of high-profile deals."

Nomura's capital ratios are the highest in the industry - total capital ratio was 24.9% and Tier-1 ratio was 17.3%, as of December 2010. The stock is expected to deliver 42% in the next one year.

7. Canon ( CAJ), through its subsidiaries, manufactures and sells network digital multifunction devices, plain paper copying machines, laser printers, inkjet printers, and cameras under the Canon brand in the Americas, Europe and Asia.

During fourth quarter of 2010, net revenue and operating profit increased 12% and 13.5%, respectively, on a constant currency basis. Performance for full year 2010 improved with net revenue and operating profit increasing 15.5% and 25%, respectively.

Going forward, the company intends to expand its market share by reinforcing its sales capabilities. For 2011, the company expects sales to grow at 10% and net profit at 20%, respectively.

The proportion of debt in terms of total assets declined during the last few years. In 2006, the debt/total assets proportion was 0.7% compared to 0.3% in 2010. Financial ratios like return-on-equity and return-on-assets stood at 9.2% and 6.3%, respectively, double that seen in 2009.

6. Panasonic ( PC) manufactures and sells electronic and electric products for consumers, businesses and industrial users worldwide.

Panasonic delivered an outstanding third quarter on the back of strong sales and rationalization of material costs and other general expenses, compensating for severe price competition, appreciation of the yen and rising material costs.

Net sales for the third quarter increased 21% year-over-year with overseas sales growing faster. Domestic sales and overseas sales were up 19% and 23%, respectively. Net income increased 25% during the third quarter on a constant currency basis, compared to the year-ago quarter.

The management is finalizing its growth strategies and reorganizing the business structure between subsidiaries like Sanyo and aims to maximize synergies for the entire Panasonic Group. Analysts expect an upside of 51% in the next one year.

5. Mizuho Financial Group ( MFG), through its subsidiaries, provides various banking and financial services in Japan and the international markets. The company offers retail banking services including housing and personal loans, credit cards, deposits, investment products, and consulting services.

During the first nine months of fiscal 2011, the company strengthened its capital base by plowing back profit and through issuance of common stock in the first half of fiscal 2010. The company's medium-term target is to take its Tier-1 capital ratio to 12% and capital ratio to 8%.

Consolidated gross profit for the nine-month period ended December 2010 rose 5% year-over-year. Gross profit was aided by trading gains and the emergence of a customer group segment, both domestically and overseas, arising mainly from non-interest income.

Analysts expect the stock to return 57% in the next one year.

4. Lloyds Banking Group ( LYG) is a U.K.-based financial services company operating in the retail, wholesale, international banking and insurance segments.

New lending subdued during 2010, although gross mortgage lending increased. Loans and advances and customer deposits declined marginally in 2010, compared to 2009.

Total income was flat in 2010, while net earnings experienced a turnaround. Net profit stood at $3.6 billion against a net loss of $10.3 billion in 2009. The company's cost-to-income ratio improved to 46.6% from 48.4% in 2009, narrowing 220 basis points.

Although higher funding costs piled pressure, prudent lending improved net interest margin to 2.1% from 1.77% in 2009. The management expects modest margin expansion for the second half of 2010. On average, analysts expect the stock to gain 61% over the next one year.

3. Sumitomo Mitsui Financial ( SMFG) provides various consumer, commercial, corporate banking, and other financial services in Japan.

The company is targeting to gain traction in overseas markets, especially Asia. It has opened one branch each in China and India. The company has entered into an alliance with RHB Bank of Malaysia, besides supporting local banks in Japan for their corporate customers' overseas business. The company intends to focus on wholesale and retail business in the future.

During third quarter of 2010, ordinary profit and net income increased 85% and 95%, respectively, on substantial trading gains. In the earnings forecast for fiscal 2011, the management targets 56% in ordinary profit and 99% in net profit.

The company is targeting 10% of consolidated ROE in the medium term and intends to maintain over 10% of consolidated Tier-1 ratio. The stock could deliver up to 62% in the next one year.

2. Barclays Plc ( BCS) is a London-based financial services provider engaged in retail, corporate and investment banking.

During 2010 December quarter, total loans and advances increased 12% from the September quarter, indicating higher growth in mortgage loans.

Impairment charges represented 70 basis points (bps) of total gross loans and advances, compared to 98 bps in 2009.

Net income increased 22% year-over-year in 2010, while profit before tax and profit after tax rose 32% and 30%, respectively.

The group's core Tier-1 ratio was 10.8%, exceeding the mandated requirement. Analysts expect the stock to gain 62% in the next one year. The stock is trading at 8.5 times its estimated 2011 earnings.

1. Syngenta ( SYT) is an agri business company offering solutions in all major areas of seeds and crop protection.

Net sales were up 4% during 2010. The company generates nearly three-fourth revenue from its crop protection business, and revenue from this segment grew 3% during 2010, while volume growth was 9%. The seed business grew at 8% for full year.

EBITDA increased 3% to $2.5 billion; EBITDA margin was 21.5% compared to 22.1% in 2009. Earnings per share increased 2% to $16.44 per share compared to $16.15 in the previous year.

The net debt-to-equity ratio was 0.2. Return on invested capital was better than expected at 23%, topping the initial target of 20%.

Going ahead, the company's market share and growth in emerging markets is expected to support volumes. Total cash returned to shareholders was $723 million in 2010, comprising a dividend payout of $523 million and the remaining was used for the share repurchase program. The stock is expected to deliver an upside of 128% in the next one year and is trading at 8.9 times its estimated 2011 earnings.

>>To see these stocks in action, visit the 11 Large-Caps With Upside portfolio on Stockpickr.

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